After facing persistent budget deficits since the 2008 financial crisis, Haverford College is now operating under a balanced budget, which will promise sustainability and financial flexibility. Without having to focus on reducing the college’s deficit, Haverford will also be able to spend more time and resources on improving the college.
“By effectively eliminating the historic annual deficits, the College is now better positioned to focus its financial resources to support the educational program and the community,” said Mitchell Wein, Senior Vice President for Administration and Finance.
Haverford has been fighting to eliminate the college’s deficits since 2014, but the roots of the problem stretch back to the economic recession of 2008, which caused the college’s endowment to drop by almost $200 million from 2008 to 2009. Because withdrawals from the endowment make up approximately a quarter of the college’s annual operating budget, Haverford has been forced to slash expenses since 2009.
The college has taken a number of measures over the last decade to reduce costs, including salary freezes for faculty and staff since 2020, investing in energy conservation, and revising financial aid policies. While Haverford previously followed need-blind admissions and a no-loan policy, both were eliminated to help achieve financial equilibrium.
The college moved to need-aware admissions in 2016 to better predict financial aid expenditures and set a cap on the total aid budget. According to Haverford’s Spring 2016 Budget Message, the majority of admissions decisions remain need-blind: in 2016, only around 5% were need-aware to keep the financial aid budget on target, although this figure has risen in recent years.
These measures have contributed to the attainment of a breakeven budget this fiscal year, yet they have received sizable criticism from students. Many believed that these actions, specifically the move to need-aware admissions, would reduce socio-economic diversity and disadvantage low-income applicants. “[Need-aware] goes directly against what the college is about, and any Quaker values this institution theoretically aligns itself with,” said student Andy Beck ’17 in a 2016 article for The Clerk.
According to Wein, the budget process aimed to preserve the college’s values while striving towards financial equilibrium, “focusing first on the academic program and the student experience,” he said. “The College initiated a number of strategies which would not have a negative impact on Haverford and our values. Much of it was done in areas other than those that affect the day-to-day student experience.”
The budget was planned to reach a breakeven status in the 2019-20 fiscal year but was disrupted by the unexpected expenditures caused by the COVID-19 pandemic. The 2020-21 fiscal year also saw decreases in revenue, due to fewer students living on campus and participating in meal plans, as well as additional expenses from COVID-related safety measures. The college responded by reducing operating expenses and faculty and staff compensation in order to reach a balanced budget. Haverford attempted to decrease the impact of pandemic-related expenditures by eliminating the salary increases, cutting pay for senior staff, freezing hiring, and reducing retirement plan contributions, as stated in the “FY 2020-21 Mid-Year Operating Budget Recap.”
Given that the college’s endowment rose by 32.1% this year, Haverford has the ability to provide raises for faculty and staff once again. Even while operating under a balanced budget, the college has at least an additional $8 million to spend, assuming it chooses to keep the endowment draw rate constant.
Economics professor Giri Parameswaran stressed the importance of improving employee compensation. “If we balance the budget by compensating employees below competitive levels, that will produce its own negative impact. We’ll find it difficult to attract and retain top quality workers as they are lured away by higher paying jobs,” he said. This may lead to greater faculty and staff turnover, as well as increased job dissatisfaction among the current employees. “All of these are costs that weigh on the institution, but don’t appear in the bottom line,” added Parameswaran.
As of now, the 2022–23 fiscal year budget planning is underway, with budget requests currently under review for the next academic year.
Excellent review of how Haverford has progressed through the years starting in 2008 to get to a balanced budget without sacrificing the highest academic standards it has always attained. The careful use of endowment funds must continue to keep the high quality of professors at Haverford. Also, graduating young people who will be future leaders and donors to that endowment is of utmost importance.
Great article, bravo Ms.Donado!